富蘭克林資源 (BEN) 2017 Q1 法說會逐字稿

Good morning and welcome to Franklin Resources earnings conference call for the quarter ended December 31, 2016.

Statements made in this conference call regarding Franklin Resources, Inc, which are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements involve a number of known and unknown risks, uncertainties, and other important factors that could cause actual results to differ materially from any future results expressed or implied by such forward-looking statements.

These and other risks, uncertainties and other important factors are described in more detail in Franklin's recent filings with the Securities and Exchange Commission including in the Risk Factors and MD&A sections of Franklin's most recent Form 10-K and 10-Q filings.

Good morning my name is Doug and I'll be your call operator today.

(Operator Instructions

As a reminder this conference is being recorded.

At this time I'd like to turn the conference over to Franklin Resources' Chairman and CEO, Mr. Greg Johnson.

Mr. Johnson, you may begin.

Thank you.

Good morning, and thank you for joining Ken Lewis and me as we discuss this quarter's results.

I hope you had a chance to read our commentary this morning and that you find our new written transcript approach to providing commentary useful.

Most importantly, investment performance against peers and benchmarks improved significantly this quarter.

Although we continue to experience outflows, I believe we are much better positioned to outperform in this environment and we're seeing some early signs of flow improvement.

Once again, we demonstrated effective cost management and extended our track record of annual dividend increases and share repurchases that more than offset compensation-related equity issuance in the first quarter.

We now would like to take any questions that you have.

Thank you.

Our first question comes from the line of Ken Worthington from JPMorgan.

Hi, good morning, and thank you for taking my question.

Maybe, first, in terms of the pending DOL rule implementation set for April, are you seeing activity in advance of the rule changes worth calling out?

In particular I'm interested to see if you're witnessing any transitions from brokerage to advisory.

Are you set up to do those tax-free exchanges or any transfers from the A shares, institutional shares?

And, really, is there any uptake of that?

Thanks.

I think, like everyone, we are still preparing for the rule in its current form.

But I think, like everyone, we expect to see a delay.

We haven't heard anything formally but I think the consensus view is right now is that you're looking at least a 6- to 12-month delay of implementation.

And I think that's just something that a lot of the broker-dealers and advisors are really digesting right now.

So, we do expect a delay.

We expect a potentially complete replacement or repeal of the rule.

And I think how it affects the advisory models over time, that remains to be seen.

But, like everyone, we still have to prepare for the existing one.

Okay, great.

And then for Ken, the fair value adjustment in G&A, I think that was with regard to K2.

Walk us what's going on with K2.

It seems with the negative adjustment, it's not all going well with K2 right now.

My impression was things were going well.

So, what's the fair value adjustment and what's going on?

Things are going well.

I think there's a couple things to consider.

Last year, we had upward adjustments in that line and now downward adjustments, so it's just a quarterly valuation.

And I think part of the valuation, a large part of the valuation, relates to the legacy K2 business and not the new business that has resulted from our acquisition.

So, on balance I would say, yes, things still aren't going well but the legacy fund-to-funds business is a little bit challenged.

And that was what the models our based on in terms of cash flow when we valued it, so that's where the adjustment comes from.

It's not the whole business.

It's not a reflection of the entire business, just a reflection of the older part of the business.

Great, thank you very much.

Our next question comes from the line of Brian Bedell with Deutsche Bank.

Hi, good morning, folks.

Maybe just staying on the DOL theme, I know you don't like to give intra-quarter commentary on flows, but obviously with the sharp improvement in performance in the fourth quarter, if you could give us a sense of whether you're seeing that translate into improved sales in January.

Obviously, we have seen that in the fourth quarter.

Do you see that trend coming through?

And then, just looking at the performance year to date, we do see a reversal of performance for some of the funds just in January.

I know it's a very short time period, of course, but you also mentioned in the prepared remarks how there are some advisors that do look at that short-term performance.

Maybe if you can give a little bit more color on that.

Yes, I think, first of all, the large driver is global bonds.

Obviously, that's been the biggest headwind in terms of flows and the rebound in performance and just how that fund is managed against -- or not managed against -- the benchmark that you do see significant swings.

It was still a tough quarter for global bond flows -- actually had higher outflows despite.

You could say -- you had very good relative performance -- but that relative performance all came right at the very end of the quarter.

A lot of it just takes time to work its way into the broker-dealer network and advisors and understanding performance.

And our big message has been, for the last month, that here is a bond in a quarter where the index was down 7% or 3%, depending which aggregate index you're looking at in the bond market, and here is a fund that was up, that provides income.

So, that, I think, puts that fund in a very unique category that, again, we think, when advisors are looking for protection in a reflationary environment, that it should do very well.

So, we would expect to see an improvement there and are seeing an improvement in the short run.

You said well some of that performance, 1300 basis points we got in a very short period, but that's a significant number against the benchmark, given a little bit back on rates declining, but not maybe 90 basis points of that, really, in January.

So, nothing significant.

So, I think we are very hopeful that fund will be viewed very differently in the market.

But it does take a little bit of time and that's been a real focus of ours to get that message and get that case study of the quarter of what this fund did in a rising rate environment versus other funds that did position themselves as flexible, total return, absolute return bond funds that didn't do well in that environment.

I think, again, that just expands the audience potentially for the global bond fund.

Performance is always a key indicator.

Looking at our six largest funds, every one of them was in the top quartile for the 12-month period, and 15 of our 20 largest funds were in the top quartile.

And that's about as good as we've ever seen for a short period.

That's helpful color.

And then maybe just more broadly on the advisor behavior trends, as you talk to your wholesalers, we've been under the impression that there was going to be a lot more implementation ahead of the DOL deadline, before the Trump win, obviously and then now with the uncertainty on the delay of DOL, and on top of that, this perception that active management is going to have a resurgence -- again, post Trump -- given the lower cost correlation and higher rates that historically have impacted that.

What are you hearing from your wholesalers in terms of the advisor mood on that and whether advisors are actually going to dally that decision themselves?

Or are they moving ahead?

I don't think there's one consistent view.

I think you have a trend that was already in place pre-fiduciary rule of going to more of a planning model against the advisor picking individual funds.

That's going to continue.

I think the fiduciary rule accelerated that.

I think some large firms favor that rule because it helps them move towards that platform even faster.

And that's where you get a little bit of, I think, some mixed opinions on what to do next.

I think your comment around this market being a more normal market in terms of winners, losers, and less correlation and less central bank risk on/risk off, it will favor active managers.

That appeared to happen last year and we think will continue to happen.

And that's why we still remain very optimistic on active investing.

But I think to give one simple answer around fiduciary, I think you get some firms moving ahead like there's no change, some that are stopping that implementation right now.

But at the end of the day, I look at it from somewhat an outside view that says anything that took a thousand pages to lay out a rule that then took months of consultants and the accountants to try to figure out what it means, and then I've seen all these different broker-dealers interpret things differently, to me that's not a good rule and one that is very open to trial lawyers to finding what really is the right rule.

And that's not, I think, a good design of a rule.

And I think that's where the industry has to take a step back and figure out what problem we're solving and then work from there.

But there really is no one general answer on how the advisor side right now is moving.

I think we get different answers from different groups almost on a daily basis.

Do you see longer term, if the rule gets restructured, the DOL working with the SEC to restructure that rule back to what it was originally intended to do?

Absolutely.

Because I think also, the intended or unintended consequence of a rule affecting just retirements is that it tends to affect everything, as many, again, go back and interpret.

It's very difficult to have one segment of your business different from the rest of it.

So, it does, I think, lend itself to that discussion of is the SEC the appropriate place to provide a rule.

But I'd also start with the -- do we need a rule -- as part of that discussion, as well.

And I think that's really where the industry now has to meet with a lot of different groups and determine what is the appropriate next step.

But I certainly think that if you decide you really do need a rule that the SEC [is] an appropriate place for that to be done.

Thanks for all that color.

I'll get back in the queue for a couple follow-ups, thanks.

Our next question comes from the line of Patrick Davitt with Autonomous.

Hi, good morning guys.

Thank you.

To the point you made earlier about performance changing sales patterns for global bond, I think in the past a few years ago you were talking about when your equity performance had started to get better, that it can take years to really turn the ship in the retail side of things.

Is there something about the degree of outperformance that we saw in the fourth quarter at global bonds that may make the experience different this time?

Or do you think this could be a multi-year turning of the ship process like you said in the past?

Yes, I think that it's a little different with this category and just based on what's happening and the amount of assets that -- think about it.

The amount that has duration risk in a unique environment, at still very low rates, that likes to have income, where can you go.

And that question is being asked right now.

You've seen it in floating rate flows and tips and things that tend to do better in a rising rate environment.

So, if you do have a non-correlated alternative asset in that category, I think it can turn pretty quickly.

I think equity is a little different.

It takes a little bit longer because of the consultant-driven side of that equation in returns.

If you recommended redemptions on one it's hard to just put it back in based on what happens in 6 months or 12 months.

I think this is a different category.

And the question, we hear it everywhere, on how do I protect assets in a rising rate environment, and here is a case study you can show pretty cleanly thaI did that in the first real move in rates.

So, I think that it can move a little bit faster than, say, your traditional equity turnaround.

Great, that's helpful.

And then as the probability of a repatriation holiday increases, has your thinking around the size that you could do and what you could do with it changed -- any more specificity there -- and to what extent M&A is still on the table?

I don't think it's changed our philosophy as we've talked about it on previous calls.

We've been optimistic for awhile that something's going to happen.

I think the probability of that's increased now as a result of the elections.

Perhaps the size of the dollars that we could bring back increases, but the devil's in the detail when they come out with this law.

So, we have to wait to see what the law says and then evaluate that and what's in the best interest of our shareholders.

But it hasn't philosophically changed our point of view.

And M&A is still something you're looking at?

Of course, yes, absolutely.

I'd say we look at, still, the world.

If you have repatriation, you factor some level on your cash that you'll pay.

Let's say it's 15%.

So, you still have an opportunity to buy something outside of the US at 15% cheaper than the tradeoff of buying shares back and having that cash unsure.

So, I think it's still an attractive time, especially when you look at the euro's gotten cheaper, the sterling is down close to one-third over a short period.

So, those are all factors that still make it attractive for us to consider M&A activity in Europe.

Yes, we haven't put M&A activity on hold.

Okay.

We've had that conversation now for awhile and there's been no movement, and I understand the bar is probably pretty high.

Could you maybe update us on the puts and takes of why nothing's happened?

Is it a lack of opportunity that makes sense?

Is it pricing?

Is it people don't want to sell?

We've had these discussions over previous calls.

We look at so many deals a year, probably dozens, I would say, maybe more.

We have made some, some small ones.

The first thing we look at is what is our need, what product needs do we have, is there a certain market that there's a target that will meet a need that we have in a certain market.

And then we look at the institutional investment process, because [key man rescue] is a huge issue in M&A deals.

And then, lastly, we look at culture, and also price.

So, those are the factors we screen through and a lot of the targets don't pass the screen, but some do.

Okay, thank you.

Our next question comes from the line of William Katz from Citigroup.

Okay, thanks very much.

I do appreciate the streamlined disclosure.

It makes life a little simpler, so thank you for that.

A couple questions that come up just from both the commentary and some of the Q&A now.

As I look at the gross sales for the franchise, you're running about $24 billion, plus or minus a little bit.

It's really nice to see it stabilizing and trend up a little bit.

Any plans to change the ad or marketing spend to potentially capitalize on this that might be able to jump start gross sales any more?

And, if so, any shift in how you might go about doing that between maybe product or distribution or digitalization?

How are you thinking these days about that growth?

First of all, we have increased our TV exposure over, say, the last six months and we'll probably continue to do that.

And I think the efforts in distribution that have been well under way on continuing to build out a digital strategy and combine -- we've had outbound sales groups that are now being combined with the traditional wholesaler.

Those efforts will continue.

Ultimately the goal is to reach more advisors in a cost-efficient manner and use technology to do that, and that's something we've been pushing hard for awhile.

But it's a fair question just around advertising and building out, also, the consultant side of our business on the retail, continue to invest there, especially as the advisors are narrowing the funnel of funds they are going to deal with, that we need to make sure that we're providing the best level of institutional service there.

So, those are the areas we're going to continue to, I think, invest in.

But I think that's a discussion we'll have, as well, just on upping the strategic spend near term on advertising from where it is.

Okay.

And just playing devil's advocate for a moment, you were very successful in gathering assets for the gold bond fund in the up cycle, but I think one of the constraints on the stock was the asymmetry that created for the franchise.

Presuming you were at the early stages of a potential recovery from here, any behavior, any strategic decisions to potentially limit the amount of AUM that could come back into the platform?

Or no?

I hope that's a problem we have, but, reality, I think if you look at the conditions that led to that flow, I think it's going to be very difficult.

If you look at when the global bond really took off, that was a period where it had an average annual return of 10% a year against the loss decade of equities.

So, it was in a position that -- and it was also the top-performing fund out of any type of fund for that decade, as well.

So, those are a pretty unique set of circumstances to have from a marketing side that I'm not sure you're going to have again.

I also think that the volatility of the fund, you always talk about it and want to make sure investors understand the risks that they are getting for that return.

But the reality is you don't control all of the sales and I'm sure some of the sales were done like a more traditional low volatility type investment when it probably is more like a global macro.

And now that we've gone through a cycle where investors have held and seen the volatility, that may or may not be attractive to certain investors.

They have that experience now in a new asset category.

So, I don't think you're going to see the explosive growth because of that volatility.

But I do think that you'll see steadier growth and hopefully the kind of investors that can withstand those moves up and down that you're going to have.

Okay.

And just one last one.

Thanks for taking the questions this morning.

In the, I think, press release or maybe your commentary -- your commentary, I guess -- you had mentioned that commissionable sales were down, I think about 15% or so, from prior quarters.

As you look forward, maybe DOL goes through, maybe it doesn't, how does that impact the mix shift of the business and the blended fee rate, leaving aside market FX impact, all else being equal?

Repeat the question one more time, please?

Sure.

I read, I think it was in your supplement, where you suggested that your commissionable sales segment was down, part of the issue is that was down about 15% versus some prior quarter comparison.

If that were to persist, what does that mean for the fee rate for the Company, leaving aside -- I understand markets and FX can be very big swing factors but leaving those aside for a moment?

Yes, the FX part, leaving that aside, I would just generally talk about the effect of fee rate.

I think there are some positive signs in the traditional business in terms of sales.

Global equity sales were good this quarter.

We do see pressure on the effective fee rate.

Gradual pressure, though.

I don't think there's anything significant but over the years, looking forward, we do expect to see our effective fee rates to come down a little bit.

And we've seen that in the last year or two.

Some of that has to do with just the product mix, whether it's more fixed income at the expense of, say, an emerging Markets mix, that will drive those down.

Some of it would have to do with the mix of retail and institutional.

Institutional tends to have lower rates -- supplemented by performance fees.

It's all of those things put together.

But, generally, I think that's a fair statement, that we're seeing effective fee rate decline gradually.

Okay.

Thank you, guys.

Our next question comes from the line of Brennan Hawken from UBS.

Hi, good morning.

Thanks for taking the question.

Can you guys please update on how much AUM there is left in the sub advise VA?

I know there's the pending roughly $4.5 billion redemption here in Q1 still expected, right?

Yes, that's right.

And I think it's around $44 billion right now, so after this next quarter around $40 billion.

Okay, terrific.

Thank you.

We'll keep you posted.

If we see there's any probable redemptions we'll keep you posted on that.

Excellent.

And then thinking about G&A on the expense side, if we add back the $12 million-or so one-timer that was referred to earlier, is that the right jumping off point?

And I know that this quarter was seasonally lower than last quarter, but it looks like, generally, there is even further typical seasonal declines over the next quarter or two.

Should we expect that off of that now lower jumping off point than we have seen in previous?

There were some other things in G&A this quarter that seasonally depressed the number, or reduced the number.

One of them was advertising, and we do expect that to ramp up.

That was probably about $8 million less than last quarter.

And that is an annual seasonal thing that we see, where it ramps up in the fourth quarter, so we would expect that to continue this year.

Professional fees was a little bit down.

We expect that to come back this year.

But as I mentioned in my comments, when you look at all of the expenses we're expecting expenses to be down around 2% year over year.

And that was for all of the expenses, not purely for G&A, right?

That's correct.

Okay, thank you.

Our next question comes from the line of Michael Carrier from Bank of America Merrill Lynch.

Greg, maybe just on the variable annuity, you mentioned there's new products, I think, on the solutions side that you guys have been working on.

Just wanted to get a sense.

When you think about that $40 billion and some of the new things you guys are coming up with, if you're starting to see any traction or demand versus the reasons or the rationale for the assets leaving, and if some of these things can start to stem that trend?

I think part of it is that you have firms that have exited the business that are in a wind down mode.

So, it's really -- how do I manage this liability that the insurance carrier has.

So, you've seen a lot of lower volatility or more transparent products that they can hedge the risk out on.

Those are really versus a traditional active fund is harder to hedge.

We have developed some lower volatility funds.

We have actually gotten some wins in that and hope we can continue to grow that.

But I think to expect -- and I think our guys are fairly optimistic on the potential there on this change to get some new assets from others, as well.

I just don't have a sense for what the probability of that is and can that offset a potential decline of another $20 billion.

Who knows.

I don't know.

But whenever there's change like that there's opportunity, and we have developed the products there and we are getting some wins in the $100 million, $200 million range.

But we need some bigger ones to offset the other numbers.

Okay.

And then just a follow-up, it seemed during the quarter the performance overall was very strong.

And when we track it, I think on the fund side it looked like it was, on a blended basis, up maybe 2%.

But in the fund table it seems like the market appreciation was very muted.

So, I'm just trying to figure out, was there something on the institutional side, was it FX, was there anything on the distribution side in the quarter?

I know we have that line in there now.

But I'm just trying to understand.

It seemed like the performance versus the appreciation in the table isn't lining up.

There was some FX in the numbers this quarter related to assets under management and non US dollar price funds.

That was almost $5 billion in the quarter.

Okay.

It just seems more pronounced but maybe we can follow-up.

Thanks a lot.

And distributions are not in that number where they were before, that you're looking at, quarter to quarter because of the change.

Our next question comes from the line of Robert Lee from KBW.

Great, thanks.

Good morning, guys.

Just another capital management question.

Share repurchases continued at a pretty high rate, $7 million this quarter.

It's been running above your US cash generation for awhile now.

So, can you just give us a sense of, assuming your appetite is still there for share repurchase at a high rate, how much more capacity you have to continue to repurchase or return capital above what you're generating in the US, obviously excluding any potential repatriation holiday or what not?

One of the things that's happening is the mix of earnings US to non-US is increasing.

So, our US cash flow is increasing.

And that's a function of the increase in assets under management for funds managed in the US.

That's something you might not see right away but you'll see over time in the disclosures.

We feel pretty comfortable that we could continue our share repurchase activity for at least the short term, one-year period, no problems.

Okay, great.

Then maybe a quick follow-up.

I know you mentioned in the prepared remarks a little bit about, almost in passing, a non-managed volatility product for the insurance channel.

But, more broadly, the one thing we don't hear maybe quite as much from you guys every quarter is where you stand with expanding the franchise into -- I guess it's called non-traditional strategies, whether it's the managed [vol] products, whether it's alternative products.

Could you maybe update us and, number one, roughly size how big maybe some of those buckets may be, what they are, and what your plans are, or at least the sales trends have been in those areas?

We don't have that in front of us on the break down.

I think in terms of the commitment, we think that's going to continue to be an important part of our growth strategy, especially as the industry battles the traditional active/passive.

And wherever we can add less correlated type assets to that fold, that's going to be important, that are harder to replicate.

We have a lot of investments made in a lot of different areas and a lot of funds but I just don't have the rolled up number here.

We're in private equity and real estate and a lot of what some would call traditional alternatives.

But I just don't know what that number would look like.

As clearly a strategic priority, we're looking at our business right now in the alternative side, the solution side -- do we have the right products in place, do we have the right (inaudible) in place, is that an area we want to focus on in M&A that probably if we were to do M&A acquisitions that would be clearly an area that we would focus on versus traditional assets under management.

So, it's definitely a priority for us and we recognize that segment of the market that presents opportunities for us.

Thanks for taking my questions.

Our next question comes from the line of Chris Harris from Wells Fargo.

Thanks, guys.

You sound a little optimistic on the institutional pipeline.

Just wondering if you guys can talk a little bit about the breadth of that and anything else that might help us gauge the size of potential things that might be coming in.

I think it looks like it's more from the pipeline, your global ag, emerging markets, local currencies.

We are getting a lot of interest, have some good numbers there, and those can result in some larger type wins -- probably a little bit lower fees, but in terms of assets bigger.

So, that's really where we are seeing.

We don't really present a number and probability, like some others do, for the quarter, but that's the area that we currently have a lot of searches that are under way and presentations and identified some probable wins in the next quarter there in those two categories.

Okay.

And then the discussion around the fee rate, you'd mentioned safe to assume long-term pressure there.

But if we do see a pretty dramatic recovery in global bond, is it safe to assume under that scenario that's going to put a pretty big upward bias on your fee rate?

I believe that tends to be one of your higher fee products.

I would say that it would mitigate any further downward pressure in the fee rate versus actually increasing it.

Okay, thank you.

Our next question comes from the line of Michael Cyprys from Morgan Stanley.

Hi, good morning.

Thanks for taking the question.

Just curious how you're thinking about possibly using greater use of performance fees in your products on the retail and institutional side.

Just any thoughts you could update us on there.

I think that's something we talked about last quarter, as well.

I think with the pressure on fees, the pressure on any fiduciaries, whether endowments and people doing searches, I think the probability for us of doing more around performance fees is very high.

We have actually been doing some pricing on institutional mandates in areas -- I think more outside the US with some sovereign wealth funds and things.

That's something that we think can be a very useful answer to some of these high pressures around just fees and rationalizing versus passive is only paying on the alpha.

And that's something that we certainly are looking at.

I don't think we have the same kind of pressure on the retail side, nor do we think that it makes a lot of sense certainly on the institutional side.

We think that could be very additive to our overall line up.

Okay, great.

Just as a follow-up to the topic on sub-advisory, just curious how you're thinking about the opportunity there for gathering assets.

If you could just update us a little bit on pricing levels within sub-advisory.

Where is that today?

And how are you thinking about pricing pressure in sub-advisory versus other parts of your business and retail versus institutional?

I think the sub-advisory model is one that we have been very open to, and certainly look at places like Japan where that really is the business model that we are pursuing.

I think there's always some restrictions on how aggressive you can be.

There's certain mandates that come in.

And, clearly, you could probably rationalize that on an individual basis but you can't rationalize it against your pricing of other products in that category.

So, you are somewhat limited by your retail pricing on how aggressive you can be in the sub-advisory model.

That's where we look at whether it makes sense to bringing in more institutionally oriented boutiques that can, again, be more flexible on pricing and not have the issue of 40 [ag] funds behind it.

That's something that when we look at our M&A strategy, it's something that we think can make a lot of sense.

Great, thank you.

Our next question is a follow-up question from the line of Brian Bedell with Deutsche Bank.

Thanks for taking my follow-ups.

Maybe just, Ken, to go back on the expense commentary.

I just want to make sure I have that right.

The expenses down 2%.

Is that excluding the sales and distribution and marketing expense?

So, instead of the $4.2 billion --?

That is correct.

Thanks for the follow-up.

And regarding, when I look at sales and distribution, I look at the revenue net of the expenses.

We expect that net number -- which is in an appendix to the presentation, give you some detail on that -- we expect that to be more or less flat, but probably increase the latter part of the year given current AUM levels.

And, of course, that's a function of sales and all that.

But at current AUM levels we expect that line to be fairly consistent with maybe an upward trend later in the year.

This is the appendix on slide 25?

I'm going to say that you're correct there.

It's in the back there.

In sales and distribution summary, right?

Okay.

I think it was about 100 this quarter.

Yes.

And again you expect it to go up a little bit?

My comments were about the non-sales and distribution lines before.

Right.

Okay.

Actually, one other clarification on repatriation.

I think you said this a couple quarters ago in terms of the amount of cash that you thought was available to repatriate.

I thought it was around $6.5 billion.

And then I think you just said that might increase.

Do you have an updated number of that?

I think that it's still pretty close to that number.

Okay.

And then maybe just one last one on the fee rate compression commentary, your expectation for that.

You mentioned that it's mix.

Is it really your expectation that the mix will shift towards more institutional channels?

Or are there other product mix by strategy baked into that assumption?

It's a combination of both.

If you go back in time when global equity in this firm was a big part of AUM, we had a higher effective fee rate because they are higher fee-earning products.

The other dynamic is -- and this is more accounting numbers than economics -- but if we have increased AUM internationally, that will put upward pressure on the effective fee rate because that effective fee rate covers distribution expenses, where in the States all that's bifurcated into different revenue streams.

And then the last thing is the channel mix, whether it's retail or institutional.

So, it's hard to say but just projecting out where we are today we do see maybe a basis point a year or something like that.

Not very much though.

Right.

And then baked into those assumptions, you are -- this is to a prior question about considering reducing some fees and replacing those with performance fees on the institutional side-- is that also baked into this assumption or would that be over and above?

Not really because it's early days for that and I don't know that would move the needle.

We were just making the commentary that you might see some additional performance fee income that you haven't seen in the past for us.

But it's early days.

Okay, great.

Thanks for taking my follow-ups.

Our next question comes from the line of Craig Siegenthaler from Credit Suisse.

Hi, good morning, guys.

This is Ari Ghosh filling in for Craig.

Just a quick one on fees.

Have you lowered pricing on any of your retail funds over the last few quarters, either with expense caps, fee waivers or straight fee cuts?

Thanks.

Think there's been a few reductions.

I think there's been some in emerging markets, as well as we lowered some of our UK retail funds.

But nothing in the larger.

I think most of our bigger funds are still below average in terms of fees relative to the group.

So, it's just really the ones that were positioned above the market that we've taken down.

Got it.

And just in terms of magnitude, like percentage of AUM, can you provide a number?

Yes, it was not a big -- the UK ones were relatively small.

And, still, the emerging markets weren't a huge number.

So, 1% or less that it would have affected of assets.

Got it.

Thanks.

There are no further questions in the queue.

I'd like to hand the call back over to management for closing comments.

Thank you, everyone, for attending the call today.

And, again, we look forward to speaking next quarter.

Thank you.

Ladies and gentlemen, this does conclude today's teleconference.

Thank you for your participation.

You may disconnect your lines at this time.

And have a wonderful day.